An Approach to Industrial Real Estate Market Segmentation and Valuation Using the Arbitrage Pricing Paradigm

Grissom, Terry; Hartzell, David; Liu, Crocker H.

doi:10.1111/1540-6229.00428

Cited by 50 publications

(20 citation statements)

References 31 publications

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“…For a comparison of holdings-based and returns-based allocation analysis, seeChristopherson (1995) andTrzcinka (1995). Also seeMyer and Webb (2000), who perform property attribution tests on a sample of REITs; andGallo et al (1997), who perform similar tests on mortgage-backed security funds.23 Grissom, Hartzell and Liu (1987) were among the first to discuss the impact of geographic regions on real estate prices.24 Prior to performing the attribution analysis, we regressed market-adjusted CREF returns (CREF return minus NPI return) against the regional indices. Slopes from the regression measure differences in asset class exposures between the CREF portfolio and the NPI.…”

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confidence: 99%

Differentiating CREF Performance

Gallo

Lockwood

Rodríguez

2006

Real Estate Economics

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We examine factors underlying the differences in commingled real estate fund (CREF) performance using a sample of 65 CREFs during 1985CREFs during -2002. More than half of the individual CREFs underperformed the employed benchmark. However, portfolios of CREFs performed well in both up and down markets, smaller CREFs outperformed larger CREFs, and top performing CREFs continued to outperform. Differential CREF performance appears to be attributable to property selection, rather than allocation across real estate sectors. Liquidityconstrained CREFs exhibited lower risk. CREFs with large benchmark tracking error experienced inferior performance. These findings indicate important cross-sectional differences among CREFs and diversification opportunities for pensions employing multiple CREF investment strategies.Real estate represents an important component of pension fund assets. 1 A substantial amount of institutionally managed pension real estate assets are invested via commingled real estate funds (CREFs). However, surprisingly little is known about the factors underlying the differences in CREF performance. Early research focuses on CREF diversification potential and performance. 2 For example, Brueggeman, Chen and Thibodeau (1984) examine the diversification benefits from adding two CREFs to a portfolio of stocks and bonds. Hartzell, Hekman and Miles (1986) use data for a single institutionally managed real estate fund to examine diversification within the real estate sector.

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confidence: 99%

Differentiating CREF Performance

Gallo

Lockwood

Rodríguez

2006

Real Estate Economics

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“…The empirical results show the income capitalization rate of the 12 metropolitan areas significantly varied. Many research studies suggested cap rates of different locations or submarkets in the metropolitan areas may have different space factors (Grissom et al, 1987;Hartzell et al, 1987;Saderion et al, 1994;Sirmans et al, 1996). Gunnelin et al (2004) found that suburban areas have higher discount rates and vacancy rates, and lower market rent.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Administrative Characteristics and Residential Types on Income Capitalization Rates in Taipei, Taiwan

Lee

Fan

2016

Asian Economic and Financial Review

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“…A handful of older studies, have analysed the distinguishing characteristics of the industrial property sector: Grissom et al (1987), investigate whether segmented market exists for industrial real estate with respect to the risk and return characteristics. The results support the existence of segmented markets for industrial real estate.…”

Section: Unit Root Testsmentioning

confidence: 99%

Dynamic interactions among property types

Yunus

2013

Journal of Property Investment &Amp; Finance

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Purpose -The aim of the study is to utilize cointegration techniques and analyze the degree of linkages among four key property types (retail, office, industrial, and residential) of eight major countries throughout North America and Europe. Additionally, the study evaluates whether investors can attain greater diversification benefits by investing across specific property sectors within their own nations in the long-run. Finally, the study examines whether certain property sectors can be considered the "leader" that drives the remaining sectors over time. Design/methodology/approach -Multivariate cointegration tests developed by Johansen and Johansen and Juselius are utilized to evaluate whether long-run equilibrium relationship(s) exist among the four property sectors. If evidence of cointegration is found, hypothesis tests are implemented to separate out the markets that can be excluded from the cointegrating relationships and to identify the markets that are the sources of the common trends (weakly exogenous), respectively. Findings -Long-run cointegration results indicate that the four property sectors of the USA, Canada, Netherlands, and the UK have fully converged implying limited diversification possibilities. The property sectors of Finland, France, Germany and Sweden, however, have only partially converged. Further analysis reveals that for these four countries, the industrial sectors provide the greatest long-run diversification benefits. Finally, weak exogeneity tests indicate that for an overwhelming majority of the countries under consideration, the residential sectors are the sources of the common stochastic trends, that "lead" the remaining property types towards the long-run equilibrium relationships. Practical implications -The conclusions from this study should be beneficial to investors, portfolio managers, pension fund managers and other institutional investors in the USA and abroad who are contemplating to invest across property sectors within their own countries in making more informed portfolio allocation decisions. The findings also highlight the importance of implementing time-series econometric techniques to accurately and appropriately model interactions among property sectors over time. Originality/value -This is one of the few studies that utilize modern-day timeseries techniques to analyze the dynamic interactions among the property sectors of eight major nations throughout North America and Europe. Prior studies, have been limited to modeling interrelationships between the property sectors of the USA and UK, with little attention given to other major real estate markets.

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An Approach to Industrial Real Estate Market Segmentation and Valuation Using the Arbitrage Pricing Paradigm

Cited by 50 publications

References 31 publications

Differentiating CREF Performance

Differentiating CREF Performance

The Impact of Administrative Characteristics and Residential Types on Income Capitalization Rates in Taipei, Taiwan

Dynamic interactions among property types

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